Thousands of New Millionaires Are About to Eat San Francisco Alive

[dimondpark]

Over it.

Originally Posted by New York Times

Thousands of New Millionaires Are About to Eat San Francisco Alive

As Uber, Lyft, Airbnb and Pinterest plan to go public, California’s newly minted rich will be hungry for parties, houses, boats, bikes — and ice sculptures.

By Nellie Bowles
March 7, 2019

SAN FRANCISCO — Big wealth doesn’t come in monthly paychecks. It comes when a start-up goes public, transforming hypothetical money into extremely real money. This year — with Uber, Lyft, Slack, Postmates, Pinterest and Airbnb all hoping to enter the public markets — there’s going to be a lot of it in the Bay Area.

Estimates of Uber’s value on the market have been as high as $120 billion. Airbnb was most recently valued at $31 billion, with Lyft and Pinterest around $15 and $12 billion. It’s anyone’s guess what prices these companies actually will command once they go public, but even conservative estimates predict hundreds of billions of dollars will flood into town in the next year, creating thousands of new millionaires. It’s hard to imagine more money in San Francisco, but the city’s residents now need to start trying.

Welcomed finally into the elite caste who can afford to live comfortably in the Bay Area, the fleet of new millionaires are already itching to claim what has been promised all these years.

They want cars. They want to open new restaurants. They want to throw bigger parties. And they want houses...


https://www.nytimes.com/2019/03/07/style/uber-ipo-san-francisco-rich.html

[Pedestrian]

^^The most ironic part of that article:

In cities like Oakland and Berkeley and San Francisco, millennials obsess over Alexandria Ocasio-Cortez’s Twitter and attend Democratic Socialists of America meetings. But the socialist passion doesn’t seem to have impacted the city’s zeal for I.P.O. parties, which the party planning community says are going to surpass past booms.

One wonders where the Socialist Tech Zillionaire Club will meet? Seems like they've driven too many of the best clubs out of business because they didn't like the noise next door to their condos.

[Gantz]

Originally Posted by Pedestrian

^^The most ironic part of that article:

One wonders where the Socialist Tech Zillionaire Club will meet? Seems like they've driven too many of the best clubs out of business because they didn't like the noise next door to their condos.

Their IPO income should be taxed at 90%, lets see what those parties will look like then!

[the urban politician]

Originally Posted by Gantz

Their IPO income should be taxed at 90%, lets see what those parties will look like then!

This is SF after all, so I wouldn't put it past their politicians to try to do that

[Pedestrian]

One wonders about the chances for a merger between the Radio Habana Social Club and the Democratic Socialists of America.

They could get together to debate Trump's "collusion" with Russia (everybody hates Russia, right?).

[BrownTown]

Originally Posted by Gantz

Their IPO income should be taxed at 90%, lets see what those parties will look like then!

Obviously I don't agree with this, but also it should be higher than the current 15%.

[Gantz]

Originally Posted by BrownTown

Obviously I don't agree with this, but also it should be higher than the current 15%.

Isn't the highest bracket 20%?

[iheartthed]

Originally Posted by Gantz

Their IPO income should be taxed at 90%, lets see what those parties will look like then!

They wouldn't actually be taxed until they cashed out shares. And even then, the theoretical higher tax rate wouldn't kick in until they sold off more than $10M. Based on the proposed tax changes by the socialists, people cashing out $1-5M to buy a house - which is probably what 90-95% of the new millionaires would be able to afford - would pay taxes at the same rate as everyone else.

[Pedestrian]

Originally Posted by Gantz

Isn't the highest bracket 20%?

California's highest marginal rate is 13.3% There is no lower rate for capital gains. Obviously, people with pre-IPO shares or vested options would have to pay federal tax when they sell (or exercise and sell) them also, probably at a rate of 20% making for a total tax rate of 33.3%

[Pedestrian]

Originally Posted by iheartthed

They wouldn't actually be taxed until they cashed out shares. And even then, the theoretical higher tax rate wouldn't kick in until they sold off more than $10M. Based on the proposed tax changes by the socialists, people cashing out $1-5M to buy a house - which is probably what 90-95% of the new millionaires would be able to afford - would pay taxes at the same rate as everyone else.

"Wealth managers" are quite properly counseling them to diversify by selling a substantial portion of stock in their employer and putting it in other assets (whether stock in other companies or whatever).

Just to note, $1 million in SF doesn't get you much of a "house". At best it gets you a 2BR/2 bath condo in an older building. It gets you at best 1 BR/1 Bath in a new building--in some just a studio. For $5 you can certainly get a house, but not a really "luxury" one.

[iheartthed]

Originally Posted by Pedestrian

"Wealth managers" are quite properly counseling them to diversify by selling a substantial portion of stock in their employer and putting it in other assets (whether stock in other companies or whatever).

Well they'd have to be vested, but maybe.

Originally Posted by Pedestrian

Just to note, $1 million in SF doesn't get you much of a "house". At best it gets you a 2BR/2 bath condo in an older building. It gets you at best 1 BR/1 Bath in a new building--in some just a studio. For $5 you can certainly get a house, but not a really "luxury" one.

Again, maybe, but the reality is that this is going to be the range of what most of these new millionaires will be able to afford. If there are going to be 10,000 new millionaires, maybe 300-500 make it into the 8-figure club, and less than 100 into the 9-figure club. About 95% of them will be in the 7-figure club... and that's assuming the market responds well.

[Pedestrian]

Originally Posted by iheartthed

Again, maybe, but the reality is that this is going to be the range of what most of these new millionaires will be able to afford. If there are going to be 10,000 new millionaires, maybe 300-500 make it into the 8-figure club, and less than 100 into the 9-figure club. About 95% of them will be in the 7-figure club... and that's assuming the market responds well.

I am thinking about what happened between 1998 and 2000. The biggest sellers seemed to be 2 BR condos, many "loft" style condos, in South of Market and it was the market for those that really crashed along with the "dot-com bust". The other thing that became a plague was the Porsche Boxster. There was gridlock at intersections among Boxsters.

This time I expect to see more tower condos sold and there are several new towers just finishing up and starting sales waiting for them (and they all have threads in the highrise section). In the auto department, I'm looking for Range Rovers and Gelandwagens to be hot along with Cayennes, Tesla X/S's and things like the Audi R8.

[Crawford]

Originally Posted by iheartthed

Well they'd have to be vested, but maybe.
Again, maybe, but the reality is that this is going to be the range of what most of these new millionaires will be able to afford. If there are going to be 10,000 new millionaires, maybe 300-500 make it into the 8-figure club, and less than 100 into the 9-figure club. About 95% of them will be in the 7-figure club... and that's assuming the market responds well.

And these are paper millionaires. They would be foolish to consume according to the norms of their net worth, at least at the onset, given the highly volatile tech valuations (um, Tesla, anyone?). I doubt too many folks are going on an orgy of Lambos and coke because they have seven figures. More likely they buy a crappy house on the Peninsula, and bulk up their kids college fund.

It is impressive, though. The Bay Area is probably the wealthiest metro on the planet (at least per capita), but it's like the wealth is all hiding. There are so few outward displays of affluence, and there are prominent geographies (ahem, Tenderloin) screaming for investment. Nothing like the extreme wealth you see in NY, LA, MIA. Hell, even places like Chicago, Dallas, Houston, even Toronto, if you didn't know better, appear to have more high income households.

[dimondpark]

Originally Posted by Crawford

And these are paper millionaires. They would be foolish to consume according to the norms of their net worth, at least at the onset, given the highly volatile tech valuations (um, Tesla, anyone?). I doubt too many folks are going on an orgy of Lambos and coke because they have seven figures. More likely they buy a crappy house on the Peninsula, and bulk up their kids college fund.

Yeah I dont foresee the hooplah this article is predicting. Ive seen these IPOs happen for 20+ years where scores of millionaires are created in the Bay Area and you rarely see ostentatious displays of wealth one would expect. It's just not what people do here.

Dont get me wrong, there was a waiting list at Porsche dealers last time around, and people go all out on homes, but that's usually it. Oh and trips-we love to travel.

[BrownTown]

Originally Posted by Gantz

Isn't the highest bracket 20%?

Yes, but the vast majority of these new "millionaires" are just barely millionaires. They will be smart enough to cash out over a few years and keep themselves under the threshold for the 20% rate in each individual year.

Originally Posted by Pedestrian

California's highest marginal rate is 13.3% There is no lower rate for capital gains. Obviously, people with pre-IPO shares or vested options would have to pay federal tax when they sell (or exercise and sell) them also, probably at a rate of 20% making for a total tax rate of 33.3%

Sure, but you'd have to be a total idiot to cash out in California.

[James Bond Agent 007]

Is it tasty?

[Pedestrian]

Originally Posted by dimondpark

Yeah I dont foresee the hooplah this article is predicting. Ive seen these IPOs happen for 20+ years where scores of millionaires are created in the Bay Area and you rarely see ostentatious displays of wealth one would expect. It's just not what people do here.

Dont get me wrong, there was a waiting list at Porsche dealers last time around, and people go all out on homes, but that's usually it. Oh and trips-we love to travel.

There really hasn't been anything like what's coming since the late 1990s and that had something of a Roaring Twenties flavor. It's would be as if Twitter and about 7 others like it all went public over a period of a couple of months (Twitter's market cap is $23 billion: Uber. Lyft, Pinterest and AirBnB total about $178 billion.

What I don't know without doing some research is how much of the pre-IPO stock or options have been given to employees. It's not like the '90s, when most pre-IPO employees were often paid primarily in options or restricted stock. So in some cases, at least, only the actual founders and very earliest employees may hold significant quantities of stock or they may have a lot.

[Pedestrian]

Originally Posted by BrownTown

you'd have to be a total idiot to cash out in California.

CA is pretty aggressive about who it considers a resident for tax purposes. If these people work for Bay Area companies and go to work at least 6 months of the year--and nearly all do--they are residents for CA tax purposes. They can move, but they'd have to move by June or so and several of these companies are probably going public before then. If they aren't employees when the IPO occurs and their options/shares, aren't vested, they get nothing.

The simple fact for most is if your job is making you rich and your job is in CA as so many are, you pay CA taxes and keep smiling. The top guys--the 8-figure and above types--could, I suppose, live on the Nevada side of Lake Tahoe and commute by helicopter. But that's not practical for most.

And no, these people don't telecommute. The reason these companies have doggy day care, free gourmet food and rooms full of foosball tables is because they want to keep the employees in the office.

[DePaul Bunyan]

Future headline:

Thousands of new tech millionaires stricken with Hepatitis, Cholera, and Salmonella after eating San Francisco

[mt_climber13]

Glad I'm moving to San Diego! Had to turn down a great job in the Bay Area because it's just not worth it.